United States v. Pioneer American Insurance Company

PETITIONER: United States
RESPONDENT: Pioneer American Insurance Company
LOCATION: Clauson's Inn

DOCKET NO.: 405
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 374 US 84 (1963)
ARGUED: Apr 17, 1963
DECIDED: Jun 10, 1963

Facts of the case

Question

Media for United States v. Pioneer American Insurance Company

Audio Transcription for Oral Argument - April 17, 1963 in United States v. Pioneer American Insurance Company

Earl Warren:

Number 405, United States, petitioner, versus Pioneer American Insurance Company et al.

Richard M. Roberts:

Mr. Chief Justice --

Earl Warren:

Mr. Roberts.

Richard M. Roberts:

-- members of the Court.

This case involves the priority of a federal tax lien versus a lien for attorney's fees.

It is before this Court on a writ of certiorari to the Supreme Court of the State of Arkansas.

The facts may be briefly summarized.

They're really not in dispute.

The taxpayers against whom the tax assessments, the federal tax assessments were made had purchased in 1958, a parcel of real estate located in Sebastian County, Arkansas.

In the note, which they assumed when they bought the property, the maker had agreed in the event of default the price of the placing of the -- and of the placing of the note in the hands of attorney for collection, or if the note is collected through any court proceedings, the maker had agreed to pay a reasonable attorney's fee.

The mortgage which secured the note provided that if the grantor should fail to pay any interest or installment or principal when due then at the option of the holder, all of the indebtedness secured by the mortgage would become due and the mortgage could be foreclosed.

The taxpayers here did default on the payments under the note in October of 1960 and all payments subsequent thereto.

On March 24, 1961, the respondent filed a suit to foreclose its mortgage and sought in that suit the allowance of a reasonable attorney's fee.

The United States was named a party defendant pursuant to Section 2410 of Title 28, because of then two existing tax liens that had been filed of record, one, November 29, 1960, the month following to the default and one on January 30, 1961.

In its answer, the United States admitted that its liens were junior to the mortgage and subordinate thereto to the extent of principal and interest.

It did however assert that its liens were superior to the lien of the mortgagor or the mortgagee rather for an attorney's fees.

On November 9, 1961, the United States amended its answer, and in its amended answer, included three additional federal tax liens that had been filed on April 14, July 17, and October 3, 1961.

On November 15, 1961, the Chancery Court of Sebastian County, Arkansas entered its decree foreclosing the mortgage and fixed an attorney's fee of $1250.

It held that that attorney's fee was entitled to priority over the federal tax lien.

On appeal by the United States, the Supreme Court of Arkansas with the dissent by the Chief Justice affirmed the lower court's decree.

This Court has many times held --

John M. Harlan II:

What were the dates of the determination in the amount of the fee?

Richard M. Roberts:

On November 15, 1961, that was after the last notice of the federal tax lien had been filed Your Honor.

This Court has many times held that the federal tax lien is a court lien as of the date that it arises.

The tax liens arise under Section 6321 and 6322 of the Internal Revenue Code of 1954.

These assessments that caused the liens to come into being are made before the filing of the notice, so that the liens had actually been and being ahead of a filing of a notice here.

However, Section 6323 (a) of the Revenue Code of 1954 requires that prior to their being entitled to priority over a mortgagee, pledgee, judgment creditor or purchaser, the notice of the lien must be filed.

Recently, this Court in the case of United States versus Buffalo Savings Bank which was decided on January 7th, 1963 held that the federal tax lien was entitled to priority over a lighter accruing state tax or local tax even though under state law, the local tax was entitled to priority over the mortgagee's mortgage.

Now, in that case as here, the Buffalo Savings Bank in -- argued and contended that because the state taxes were required it could be paid and added to the mortgage that they also should be entitled to the same standing as the mortgagee to be ahead of the federal taxes.

They also contended, as the state court had held there that the property should be sold and the taxes paid as a cost of the proceeding that they were entitled to have the property sold and the taxes paid as part of the cost.